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The Airpocalypse

Kepler Cheuvreux, 2 November 2018

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• THIS PRESENTATION (THE “PRESENTATION”) HAS BEEN PRODUCED BY FLEX LNG LTD. ("FLEX LNG" OR "THE COMPANY”), SOLELY FOR PRESENTATION PURPOSES

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Disclaimer

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Air pollution: a glocal problem

• 9 out of 10 people breathe air containing high levels of pollutants.

• 7 million pre-mature deaths every year caused by outdoor and household air pollution.

Source: WHO/FT

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• The number of “very unhealthy” days or worse (when levels of dangerous particles called PM2.5 crossed 200)

rose to 84 in New Delhi in 2017 from 66 in 2015

• In Beijing they dropped to 20 days from around 43 over the same period. PM 2.5 down 54% Q4-17 vs Q4-16

• World top ten most polluted cities (PM 2.5) are all in India

Policy matters

Air quality: New Dehli Air quality: Beijing

Source: AirVisual

Note: Data shows an air quality index (AQI) value derived from raw PM 2.5 readings.

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China’s environmental Kuznets moment

Source: BCA, PEW Research, Energy Policy vol 62 2013

• GDP (PPP) per capita in China at about $17k, but at European levels in Beijing, Shanghai, Tianjin (>$30k)

• Economy reached an turning point at their Environmental Kuznet Curve (EKC) where air and water pollution are

number 2 and 3 of top concerns

• Half of public according to Pew support lower growth as trade-off for lower air pollution

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Switching to LNG is as much health policy as energy and/or

environmental policy

• In South Asia, air pollution larger health risk than tobacco, cancer, water sanitation and on par with dietary risk

• If the air pollution improves from China's level to the American EPA standard level, that means that would improve

everyone's education by around one year

Source: Texas A&M University, NPR and Science News

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19th century: coal, 20th century: oil, 21th century: gas (and LNG is

where the growth happens)

Source: BP

Fuel share Gas sources LNG production

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Outlook for LNG shipping

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Market for seaborne LNG transport is maturing

From point-to-point utility business to global tradeable commodity business

• 1960s to mid 2000s

• Traditional liner model (P2P)

• Back2back contracts 20yr+

• Steam vessels (≈180tpd)

• Leverage: 80-100%

• Utility business

• Libor spread yield

LNG 1.0 LNG 2.0 LNG 3.0

• Mid-2000s – about now

• Portfolio players

• Term contracts (7-15yr)

• DFDE/TFDE vessels (≈135tpd)

• Leverage: 70-80%

• MLP business

• MLP yield

• The way of the future

• Commoditization of LNG

• Short and medium term contracts

• Two-stroke low-speed (≈100tpd)

• Leverage: 50-75%

• Capital market business

• ROCE

2010: ≈200MMtpa 2000: ≈100MMtpa 2020: ≈400MMtpa

Yearly liquefaction capacity:

+100% +100%

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Unique fleet comprising 13 modern 5th generation LNGCs

ME-GI X-DF ME-GI with Full

Reliquefaction System

ME-GI with Partial

Reliquefaction System

High Pressure Low pressure

Ranger

Rainbow

Endeavour

Enterprise

Constellation

Courageous

Resolute

Reliance

Freedom

Aurora

Amber

Vigilant

Volunteer

ME-GI and X-DF vessels are the most fuel-efficient and technically advanced LNGCs

ME-GI and X-DF vessels are the most fuel-efficient and technically advanced LNGCs

5x NBs acquired

• Three 174,000 CBM LNGC newbuildings at DSME with ME-GI engines and Full Reliquefaction System bringing BOR to 0.035%

• Two additional X-DF LNGC with Mark III Cargo Containment System with BOR of 0.085%

• Favourable slots mid-2020 to early 2021

Source: Company

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0

10

20

30

40

50

60

70

# of vessels

2002 1999 2010 1997 2018 2004 <1990 1991 1992 2014 1993 1994 1995 1996 2000 1998 2001 2003 2005 2006 2007 2008 2009 2011 2012 2013 2015 2016 2017 2019 2020 2021

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0

0.2

0.4

0.6

0.8

1

ST 138k TFDE 160k X-DF 174k

Ship fuel consumption comparison

ME-GI and X-DF vessels with significant fuel cost savings

LNGC existing fleet and orderbook by propulsion type

Comparison of LNG Ship Types on UTC Basis*

| 11 2018

LNG shipping unit transportation costs (U.S. Gulf – China round trip)

(1) Assuming speed of 16.5 knots (~74 days round trip), term charter rate of USD 70k/day, boil off gas priced at USD 5 / mmbtu, port cost of USD 250k,

and allowance for port fees and loadring discharge time. Source: Poten & Partners

Notes:

ME-GI / X-DF Other DFDE/TFDE ST

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

1st Generation 145k ST 155k ST 160-165k DFDE/TFDE 174k ME-GI

Charter Hire Port Charges Boil Off FuelUSD / mmbtu

Source: Company

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Largest LNG shipping companies(1) FLEX will be the leading operator of 5 th gen LNG vessels(2)

FLEX to become the leading owner of 5th generation LNGCs

0 5 10 15 20 25 30 35 40 45

Mitsui OSK

NYK

Qatar Gas

Teekay

Maran Gas Maritime

MISC

BW Gas

FLEX

Nigeria LNG

Golar LNG

GasLog

Kawasaki Kisen Kaisha

Knutsen OAS

Hoegh & Co

SK Shipping

Shell-Royal

GasLog Partners

Abu Dhabi National Oil Co

Chevron Corp

BG Group

Golar LNG Partners

SOVCOMFLOT

Petronas

Korea Line

Dynagas LNG Partners

China Shipping LNG

BP

ICBC

Sonatrach

Exmar

China LNG Shipping

Cardiff Marine

Small conventional Conventional Large conventional Super large

(1) Based on commercial ownership of the vessels (source: Braemar ACM); (2) Source: Clarksons SIN

8

10 10 10

7 7 7

6 6

5

5

Cardiff Marine

FLEX Teekay LNG

Partners

GasLog Nippon Yusen

Maran Mitsui O.S.K.

BW Gas BP Knutsen OAS

13

Vessels acquired Existing fleet (incl. NBs)

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Early phase of recovery of LNGC market

• Spot rate improved before winter season 2017/18

• Rates have rebounded after glut of available tonnage depressed rates coming out of the winter early 2018

• Arbitrage opportunities due to volatile spread between European and Asian prices

• Unusual strong European gas prices have limited re-export, normalized European gas price will tighten LNGC market

further

Estimated monthly average LNGC spot rates

Source: SSY

Natural Gas Prices by Region

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• Modern slow-speed two-stroke tonnage above USD 100k mark

• Vessel availability significantly reduced as charterers absorbed tonnage to secure capacity for the winter season

And the market is sold out

Available spot vessels in different basins

Source: Arctic Securities, Affinity and Fernleys

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LNGC market has become more liquid

Number of spot fixtures (less than 3 months)

Number of semi-term fixtures (3mth to 5yrs)

Source: Clarksons LNG

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Strong growth ahead for LNG

Source:McKinsey

• High future demand growth is expected as natural gas increase it’s market share in the energy matrix

• All top five growth countries located in Asia

• China’s increased demand was about half of the added volume in 2017 and continued strong growth as

aim is to increase natural gas from 6% to 10% of energy use by 2020

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Glut of LNG comming to the market

Source: Fearnleys

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Few available modern vessels despite recent ordering

• About 90 orders for delivery in the period until 2021

• A deficit of about 40 vessels given start-up of about 96.5MMtpa in period 2018-2022

• Increased sailing distances supportive of LNGC demand

Order book for large LNG carriers Average sailing distances (laden)

Source: Fearnleys and DNB

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The LNG shipping market is expected to gradually tighten from the end of 2018, with Australia, the U.S. and Russia

being the driving forces for soaking up tonnage

Well positioned to benefit from a tightening LNG shipping market

Delivery date existing newbuilds Delivery date vessels newly acquired newbuilds

FLEX is one of the few Owners with uncommitted tonnage being delivered in 2018-2021

-70

-60

-50

-40

-30

-20

-10

0

10

20

30

2015 2016 2017 2018 2019 2020 2021 2022

LN

GC

Ov

ers

up

ply

(S

ho

rtfa

ll)

Source: Fearnleys

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US-China trade conflict and impact for LNG trade

China’s quarterly LNG import by country # of US cargos to China and US LNG market share in China

China’s LNG demand and existing LNG contracts

“China is building a new coal-fired

power plant every week and is set to

surpass America as the biggest source

of greenhouse gases within a year. If

the world is to contain its carbon

emissions, America must not only clean

up its own act but also help China to

green its economic growth.”

Economist, 17 May 2007

Source: Bloomberg New Energy Finance and Economist

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Summary

Right Ships

Right Time

Right Market

Right Owner

Four LNGCs on the water and nineLNGCs under construction, all

fitted with 5th generation propulsion (two-stroke low-speed

engines) providing substantial fuel savings and larger parcel size

The market have re-balanced and is now in early phase of

recovery with higher charter rates and utilization as well as

increased interest for longer term contracts

LNGC market have very strong long-term fundamentals due to

increased demand for LNG, emissions focus and

commoditization of LNG resulting in more trading

The principal shareholder has evidenced unrivaled performance

in building strong shipping companies and is supportive of Flex

LNG in relation to credit and S&P transactions

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Q&A